A textbook, when explaining the effects of higher interest rates, claims that:
The initial equilibrium is with real output at $Y_0$,the price level at $P_0$ and the rate of interest $r_0$. An increase in the rate of interest to $r_1$ will need to be balanced by a decrease in money supply to maintain money-market equilibrium.
The illustration below accompanies the claim.
How/why does the money supply shift leftwards to accommodate a return to "money-market equilibrium", and what is such an equilibrium to begin with?
Additionally, is this shift automatic or is it one where the government must intervene?